Alibaba founder Jack Ma speaks before an MOU signing ceremony in Bangkok on April 19, 2018 during a visit to the country to announce the group's investment in the Thai government's Eastern Economic Corridor (EEC) scheme. / AFP PHOTO

PR for Ma or the real deal for Thai SMEs?

Corporate April 30, 2018 01:00

By Wichit Chaitrong,
Asina Pornwasin
The Nation

4,984 Viewed

Will the impact of Alibaba investment lean toward a win-win or a zero sum game?

The government has assured the public that Jack Ma, owner ecommerce giant Alibaba, will bring large benefits to the country after pledging to invest Bt11 billion in the Eastern Economic Corridor.

Ma has signed several memoranda of understanding (MoU) with government agencies, pledging both close collaboration and cash investments with several government agencies.

Prime Minister General Prayut Chanocha, trying to soothe public fears about an e-commerce monopoly said he believed that Alibaba investments would benefit the country, particularly Thai farmers. There is some evidence to apparently support Prayut’s claim – sales of over 1000,000 durian fruit on the Alibaba website after Ma met Prayut on April 19.

Critics, however, are still cautious about how large the expected benefits could be from Alibaba’s investment pledges.

“The government should not sign MoUs with a single business, because it raises a question of favouritism – why Alibala, why not Tencent or Amazon?” said Teerana Bhongmakapat, a former dean of Chulalongkorn University’s Economics Faculty.

“Ma has obviously benefited from the deal at least regarding the public relations as he could show other business leaders that he could access inner circles of the Thai government,” said Teerana.

Other investors might think that Ma has a personal connection with members of Thailand’s Cabinet, he argued.

The one-on-one meeting and the MoU signing have also demonstrated that the Thai government desperately needs Ma, Teerana further said.

Teerana also argued that Alibaba is part of a Chinese strategy to expand its overseas investment and trade in Asean countries. Alibaba also wants to sell more Chinese goods to Thai consumers, while few Thai products will be qualified to take advantage of Alibaba platform, warned Teerana.

Thai bankers are also aware that Alibaba, other e-commerce platforms and financial technology companies (fintech) will eat up their traditional banking businesses. E-commerce platforms and fintechs also provide some financial services, such as online payment and personal and SME loans.

This fear has led Thai banks to recently decide to waive fees for online transactions in order to lure clients to their platforms. Banks also making partnership with tech firms are racing to provide online services, such as management of inventory, payroll, and accounting to SMEs in order to retain their royalty.

Thanyalak Vacharachaisurapol, deputy managing director of Kasikorn Research Centre Co, said that Alibaba would harvest and make use of “big data” related to trade and financial transactions for its future services. It may provide loans and cash management for SMEs which use its e-commerce platform, she said.

Thailand will feel the impact, but it would also affect other Asean markets as well, given the many business units under Alibaba including Ant Financial and Ascend Money, she said.

Kasikorn Bank has worked with Ant Financial, which operates Alipay, one of the largest Chinese online payment systems and able to provide online settlement for Chinese tourists who visit Thailand and spend money here.

But central bank governor Veerathai Santiprabhob, apparently does not much worry about the negative impact of Alibaba investment.

“It is not a black or white matter,” he said. “Thai banks have to adapt and we can see they are as they waive online transaction fees.”

If Alibaba affiliate Ant Financial wanted to provide loans in Thailand, it would have to set up an office here and it would be subject to Thai laws, he assured.

In response to the criticism of government favouritism toward Alibaba, Kobsak Pootrakool, minister of the Prime Minister’s Office, said that government welcomes all business leaders, not exclusively Ma, if they have good proposals.

He said that the Thai government’s forming a partnership with Ma is the result of two-year negotiation since Ma first approached the Thai government.

Kobsak was confident that farmers will largely benefit from Alibaba’s e-commerce platform since it eradicates middlemen. For example, when selling an agricultural product worth Bt100, a typical Thai farmer would get only Bt2 after the product had gone through many middlemen, Kobsak claimed.

The middlemen might be adversely affected by investment Alibaba in Thailand, but they would be able to adapt to new competition, he claimed.

If Alibaba Group also provides loans to SMEs in Thailand in the future, it would benefit those groups. Many are not now able to seek loans from local banks, he said.

The Revenue Department has worried about the level paying field as Alibaba and other giant e-commerce operators from outside the country could avoid paying the 7-per cent value added tax (VAT), while local ecommerce operators would have to pay. The department is drafting a law to collect VAT from global e-commerce operators.

Teerana said that it may be too early to tell who will benefit the most from the deal, as Ma has not fully implemented what he pledged.